UPDATE ON KATANGA SUSPENSION OF UNPROCESSED ORE

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 000387 SIPDIS SIPDIS E.O. 12958: DECL: 04/02/2017 TAGS: EMIN ETRD ECON PGOV CG SUBJECT: UPDATE ON KATANGA SUSPENSION OF UNPROCESSED ORE REF: A. KINSHASA 346 ¶B. KINSHASA 330 Classified By: EconOff W. Brafman for reasons 1.4 b/d. ¶1. (SBU) Summary. Katanga Governor Moise Katumbi has permanently banned the export of non-refined metal from the province. All major exporters but one have a six-month grace period within which they may continue to export certified ore concentrate. Export traffic has begun to normalize, although about 400 trucks with ore, not claimed by their owners, have been stopped at the main Katangan customs border since the export suspension began. Katumbi has threatened to resign from the governorship if the GDRC does not begin retroceding to Katanga state revenues generated there. End summary. ¶2. (SBU) Katumbi has made permanent his March 6 suspension of unprocessed ore. For the next six months, companies may continue to export laboratory-certified concentrate, but thereafter they may only export refined metal. The Vice Minister of Mines, Victor Kasongo, told EconOff on March 29 that the Ministry of Mines supports these measures and has submitted the proposals to the Council of Ministers for approval. ¶3. (C) The only large foreign company that remains unable to export its ore is First Quantum/Comisa (FQ),despite its assertion of earlier Ministerial permission to do so. The company has a facility on the DRC-Zambian border, with a copper mine in the DRC and a conveyor belt that carries raw ore into Zambia for processing. The Mining Code prohibits the export of unprocessed ore unless the exporter can show: 1) it is not economically viable to treat the raw substance in the DRC; 2) the DRC will realize "advantages" upon granting the waiver. (Note: The Mining Code does not define "advantages." End note.) In 2003, FQ obtained a waiver from the Ministry of Mines to conduct this operation. In a March 26 letter to FQ, Minister of Mines Martin Kabwelulu said the waiver "did not respect the spirit of the Mining Code" because it did not demonstrate that the DRC accrued any benefit as a result. Vice Minster of Mines Kasongo told EconOff that FQ had agreed to pay the GDRC taxes on the value of the metal refined in Zambia, but was instead only paying taxes based on the value of the unprocessed ore. In his letter, the Minister demanded that FQ henceforth treat the minerals in the DRC, launch a social development program, and hire 800 employees of the essentially-defunct DRC mining parastatal Sodimico. FQ's managing director told EmbOffs it is not cost effective to build a refinery, although it is building a concentrator. ¶4. (C) Traffic at Kasumbalesa, the main customs border in Katanga, is reportedly beginning to return to normal, although about 400 trucks remain abandoned there. MONUC's Lubumbashi head of office, Slobodan Didi, said that until March 28 about 500 ore-bearing trucks (not claimed by companies after the suspension) were stuck at Kasumbalesa with their drivers, who have inadequate food and water. According to Didi, on March 28, following a request of the Zambian government, about 100 Zambian drivers and their trucks were able to return to Zambia upon payment of a symbolic fine. Customs authorities seized the ore in the trucks. Didi said MONUC has neither the mandate nor the resources to allow its Indian border police in Katanga to conduct border control activities, as the provincial government had requested (reftel A). However, he has proposed that MONUC provide training to the DRC border police. ¶5. (SBU) At a recent briefing, Governor Katumbi announced that he expects Gecamines, the DRC's copper/cobalt mining parastatal, to begin purchasing and processing the ore seized at the border as well as all artisanally-mined minerals. A mining consultant told EconOff that Gecamines would not have the capacity even in six months to handle all this ore - which could amount to several hundred thousand tons. Very few functioning ore refineries exist in Katanga. ¶6. (C) Katumbi told EconOff that although tax revenues generated in the province have grown by 30 percent since the export suspension, this increase has not benefited Katanga. The provincial government has not been able to retain these proceeds, as Katumbi previously said he would make happen (reftel B),because customs officials are sending the money directly to Kinshasa. Katumbi claims he will resign if Katanga does not begin receiving the retrocessions, because he does not want to break his promises to the Katangan population. KINSHASA 00000387 002 OF 002 COMMENT -------------- ¶7. (C) Katumbi's threat to resign is likely a bluff, especially since he has not made it publicly, but he is quite serious about increasing state revenues and decreasing customs fraud. His demand that within six months all ore be refined in Katanga, however, is not feasible. End comment. MEECE